The Sangamo Therapeutics, Inc. (NASDAQ:SGMO) share price has softened a substantial 29% over the previous 30 days, handing back much of the gains the stock has made lately. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 18% in that time.

Although its price has dipped substantially, you could still be forgiven for feeling indifferent about Sangamo Therapeutics' P/S ratio of 12.3x, since the median price-to-sales (or "P/S") ratio for the Biotechs industry in the United States is also close to 10.6x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

How Sangamo Therapeutics Has Been Performing

While the industry has experienced revenue growth lately, Sangamo Therapeutics' revenue has gone into reverse gear, which is not great. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

What Are Revenue Growth Metrics Telling Us About The P/S?

In order to justify its P/S ratio, Sangamo Therapeutics would need to produce growth that's similar to the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 94%. As a result, revenue from three years ago have also fallen 91% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the seven analysts covering the company suggest revenue should grow by 114% per annum over the next three years. That's shaping up to be materially lower than the 139% each year growth forecast for the broader industry.

With this in mind, we find it intriguing that Sangamo Therapeutics' P/S is closely matching its industry peers. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

What Does Sangamo Therapeutics' P/S Mean For Investors?

With its share price dropping off a cliff, the P/S for Sangamo Therapeutics looks to be in line with the rest of the Biotechs industry. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our look at the analysts forecasts of Sangamo Therapeutics' revenue prospects has shown that its inferior revenue outlook isn't negatively impacting its P/S as much as we would have predicted. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. Circumstances like this present a risk to current and prospective investors who may see share prices fall if the low revenue growth impacts the sentiment.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for Sangamo Therapeutics (2 are concerning) you should be aware of.

If these risks are making you reconsider your opinion on Sangamo Therapeutics, explore our interactive list of high quality stocks to get an idea of what else is out there.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.